It is now almost impossible to watch the news or read an article without the mention of cryptocurrencies. So just what are cryptocurrencies? And how can you use them? Below, you’ll find a quick overview of all things cryptocurrencies.
Different Forms of Crypto
The technical definition of a cryptocurrency is digital money which is backed by blockchain technology, but depending on which coin or token you are talking about, the operation and use can vary widely.
Bitcoin is perhaps the most famous of all cryptocurrencies. Bitcoin is a digital form of money, which is decentralized in nature. This is possible thanks to blockchain technology, which keeps a record of all Bitcoin transactions on a ledger. Bitcoin is generally used for peer to peer payments.
Litecoin is another cryptocurrency that is generally used for peer to peer payments, and is highly regarded as a fork of Bitcoin technology. This means that Litecoin operates in the same manner as Bitcoin, except for a few minor differences. And these minor differences have to do with the scalability and cost issues that Bitcoin is currently facing.
Ethereum is a decentralized network which hosts a variety of smart contracts and dapps. Think of it a bit like a decentralized internet. Although Ethereum can be used for payments between friends, it’s true purpose is to host applications which can be applied in business, health care, and government.
Decentralized applications, or dapps, are applications which can be designed to serve any purpose. The only difference between these and regular applications, is they are decentralized in nature, meaning they are operated on a blockchain instead of being controlled by a single entity.
Smart Contracts are computer applications which execute automatically when given a certain input. This enables them to act as the middle men for digital transactions, without needing human interference.
Different Types of Crypto
There are numerous different types of crypto out there, and which one you use will depend on the purpose you wish to use the coin for.
Coins are cryptocurrencies which operate on their own blockchain. They can be payment systems like Bitcoin, or networks like Ethereum. Bitcoin, Litecoin, and Ethereum are all coins.
Tokens, similar to coins, can be used for a number of different purposes. The main difference however, is that tokens don’t have their own blockchain which they operate on, but rather they are built on top of another blockchain, such as Ethereum. The most famous tokens are Tether, UNUS SED LEO, and Chainlink, all of which are built on the Ethereum blockchain.
Utility tokens are also cryptocurrencies, but instead of acting as just general currency, they tend to represent access to a certain product or service. Utility tokens are generally given to people who invest in a cryptocurrency technology in its infancy stage, but they are also commonly used on cryptocurrency exchanges.
A security token is a cryptocurrency which represents a real world asset that is able to be traded on the blockchain. These tokens are regulated by the government and must adhere to certain standards, like stocks in the stock market.
Of course these aren’t all the forms and types of cryptocurrencies out there, and more are invented every day. For more information about cryptocurrencies check out the Stably website at Stably.io.
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